CFPB Removes Underwriting Provisions from 2017 Small-Dollar Lending Rule

The Consumer Financial Protection Bureau today issued a long-awaited final rule removing the prescriptive underwriting provisions from its 2017 small-dollar lending rule. That rule imposed an ability-to-pay test on a wide-swath of small-dollar loans of 45 days or less, including payday loans, auto title loans and bank-provided loans with balloon payments.

Today’s final rule—which takes effect 90 days after publication in the Federal Register—preserves the complete exemption for banks and other depository institutions that made 2,500 or fewer small-dollar loans in each of the current and previous years and for which these loans account for no more than 10% of revenues.

The CFPB also said it would move ahead with the rule’s payment provisions, which prohibit lenders from making a new attempt to withdraw funds from an account after two consecutive failed attempts without consumer consent. Those provisions exempt attempted transfers by institutions that hold the borrower’s account and do not charge an insufficient funds or overdraft fee for the attempted withdrawal.

In addition, the CFPB issued a statement noting that it “does not intend to take supervisory or enforcement action” to enforce the payment provisions with regard to cover loans that exceed the Regulation Z coverage threshold, which is currently set at $58,300. ABA had urged the bureau to exempt from the rule’s coverage traditional consumer loans made by banks, such as “bridge” loans, demand lines of credit and loans secured by securities.